Gold Capped: Getting rich off the real-money auction house?

Every week, WoW Insider brings you Gold Capped, in which Fox Van Allen and Basil "Euripides" Berntsen aim to show you how to make money on the auction house. Capitalism is the best, and communism is for dirty, Soviet-sympathizing hippies. If you disagree, email Fox or twitter him @foxvanallen so you can be added to the CIA's "list."

When I first picked up playing the auction house game as a hobby, it was pretty low stakes. After all, I was playing with fake money, amassing a largely non-negotiable fortune that I didn't know what to do with. One million gold -- what was it good for? I couldn't use it to buy a new car; I couldn't use it to pay my rent. Heck, I couldn't even use it to pay for my WoW subscription. It was a majestic fortune usable only in a world that didn't exist, forever trapped behind the computer screen.

One week ago today, Blizzard dropped a bombshell: Diablo 3 would contain a real-money auction house. Need a new weapon to give you a little bit of an extra edge? Fork over $4.99. Need money for lunch next week? Log on, and sell a portion of your in-game fortune for real-life cash.

Of course, that's just for the new Diablo 3 game. But you can't help but start thinking ... what if? What if Blizzardstarted to allow real-money transactions in WoW? Could it? Would it? And if it did, could we actually use this to make some serious, significant real-life money?

A real-money auction house in World of Warcraft?

It's the $64,000 (64,000 gold?) question: If Diablo 3 is getting a real-money AH, will WoW eventually get one too?

Before we get in too deep, we need to clarify something: Blizzard has no plan to implement real-money auctions in World of Warcraft. In an interview with Eurogamer last week, Jay Wilson, lead designer for Diablo 3, had this to say about the possibility of a real-money auction house in WoW:

Eurogamer talk with Diablo 3 Lead Designer Jay Wilson

Blizzard's basic rationale for allowing real money trading - which can be summarised as 'players will do it anyway, so we may as well provide a secure avenue for it (and get our cut)' - isn't quite the whole story. If it were, the company would be planning a similar service for World of Warcraft, which supports a massive black market in game gold. But we're explicitly told that this isn't on the cards.

"I don't think you would ever want to put this system in World of Warcraft [because WOW's item game is] not a trading system, it's a prestige system," says Wilson. He means that the very best items in WOW are obtained from, and emblems of, success in raiding or player-versus-player, and they can't be traded. "Doing something like a real money auction house in World of Warcraft would be highly damaging to the game design, so we would not do it there."

Though the real-money auction house may wind up to be a decent source of income for Blizzard, that's not why WoW's parent company came up with the revolutionary idea. The Diablo 3 AH is Blizzard's white flag, surrendering to gold sellers. The company hopes that by facilitating the sale of non-black-market gold, it'll be able to drive down the bad guys' margins, reduce the number of sinister players in the market, and overall, save its customer service folks the hassle of dealing with all the problems that ultimately happen as a consequence of gold selling.

But does Blizzard mean it?

For now, absolutely -- World of Warcraft will remain as it is. Still, you can't deny that the world is changing. The world's most widely played MMO, Maple Story, lets players buy all sorts of things with real money -- even items that change the gameplay experience. Heck, in iOS games like Angry Birds and Tiny Tower, you can spend a few bucks to "cheat." If a game is played while you're connected to the internet, you can bet that sooner or later, you're going to have the option to buy things with real-world money -- possibly even items like weapons and armor.

What Blizzard is doing here is taking a huge risk. Already, the real-money auction house has been subject of a lot of criticism. If Blizzard unleashed this kind of bombshell on WoW, it would risk losing a huge part of its eight-digit playerbase. So Diablo 3 is something of a test balloon. If it succeeds (and by the end of 2012, we'll have enough financial data to know for sure whether it did), then Blizzard will have plenty of reason to revisit its current position -- perhaps not for World of Warcraft, but for the next iteration of the World of Warcraft IP.

If a real-money auction house in Diablo 3 is a success, it'll find its way to Azeroth in one game or another. Each and every one of the existing concerns is easily mitigated. Blizzard can control what is bought and sold by making all top-level gear soulbound. Raiders will still have to work for their gear; more casual players might be able to spend $10 and put together a basic set for some regular heroics.

The possibilities for a WoW real-money auction house

The Diablo 3 model is somewhat different from the microtransaction model. Blizzard isn't the one selling weapons, items, and (as will be possible with Diablo 3) even gold; it's just taking a cut of the sales proceeds. It'll work something akin to an in-game version of eBay. A seller lists an item, and Blizzard charges a small fee for that. The item actually sells? Blizzard gets another cut. If real-money auctions ever come to WoW, there's no reason to think it wouldn't operate the same way.

What kind of money could someone actually make on the real-money auction house? Could we all be on the verge of starting new careers?

Well, let's not get ahead of ourselves. There are a number of factors that will severely impact the value of in-game gold once anyone can buy or sell it.

Things tend to cost more when they're illegal. Right now, there are plenty of companies willing to sell WoW gold to players -- all in violation of the terms of service, of course, and with some incredibly seedy business practices to say the least. While these overseas companies are profitable, much of the money they make is predicated on the practice's being forbidden. Legitimate sellers are kept out of the market (because in this market, there's no such thing), keeping prices high. The fact that Blizzard often catches and bans gold mules increases the difficulty of these gold sellers getting their oft-stolen goods to market, thus keeping prices even higher still.

Open up the gold selling market to everyone and all of a sudden, these black market companies aren't the only ones in the market. They'll be competing against some 15-year-old in Ohio, a mother of four in San Diego, and some dude in Pennsylvania who lives in his mother's basement. Competition goes up; prices go down. Where one of these sketch companies were once able to sell, say, 300 gold for $1, all of a sudden you have an influx of people who value this fake money way lower than that.

Ultimately, a real-money auction house would have major consequences for the in-game economy. It would create a new market where anyone could exchange real-world money for in-game gold, and vice versa. In-game currency would become far easier to access, and thus, its perceived value would decrease.

Consider this: To buy a i378 BOE epic in the game right now off the auction house, a player will have to go through a lot of work -- often several hours or more -- to get the gold needed. Working in game is the only to get an item like that. Once that i378 epic is available for purchase with little effort by using real-life currency, all that in-game work is essentially devauled by the simple presence of another option.

Is that a good thing for us? Well, it's a trade-off -- we get a much more liquid currency, but we'll generally have to work a lot harder in game to get it. This gold rush -- or at least the public perception of a gold rush -- will dramatically increase participation in the in-game economy. It'll get a lot harder to do what we do. We won't get rich off it, but there's no reason to think that a skilled auctioneer couldn't pull in a couple hundred extra bucks a month. Doing so will require us to bring our A game -- but really, shouldn't we be bringing our A game already?
Maximize your profits with more advice from Gold Capped. Do you have questions about selling, reselling, and building your financial empire on the auction house? Fox and Basil are taking your questions at fox@wowinsider.com and basil@wowinsider.com.